CCP market assessment: ‘Civil aviation sector facing mounting economic pressures’
ISLAMABAD: Pakistan’s civil aviation sector is facing mounting economic pressures, structural weaknesses, and an uneven competitive environment that are undermining the sustainability of domestic airlines, according to stakeholder feedback compiled in a new market assessment by the Competition Commission of Pakistan (CCP).
The study, based on interviews with airlines, travel agents and other industry participants, reveals that domestic carriers are struggling under heavy taxation, currency volatility and high financing costs, while competing against heavily subsidised foreign airlines operating on Pakistan routes.
Domestic airlines told the CCP that between 60 and 70 percent of their operating costs are dollar-denominated—including fuel, aircraft leases, maintenance and pilot salaries—making them highly vulnerable to the depreciation of the Pakistani rupee.
Carriers also flagged a steep domestic tax burden, noting that airlines pay around 18 percent sales tax on fuel and aviation-related services, while the tax component on some international tickets can approach 70 percent. Foreign airlines, however, do not face the same domestic taxation when operating in Pakistan, creating what stakeholders describe as a distorted playing field.
Financing constraints are another major challenge. Airlines reported that borrowing costs in Pakistan range between 13 and 14 percent, far higher than global financing rates of 2 to 3 percent. With airline profit margins averaging only three to four percent globally, industry players say such high interest rates make fleet expansion and long-term investment nearly impossible.
Stakeholders further pointed to intense competition from large Middle Eastern carriers such as Emirates, Qatar Airways and others that benefit from subsidies, low taxes and powerful hub networks. Domestic airlines claim these carriers can operate Pakistan routes at near-cost levels simply to feed traffic into their international hubs.
Travel agents also complained about discriminatory pricing practices, saying airlines increasingly offer cheaper fares and preferential terms through their own websites or corporate deals, bypassing traditional distribution channels and squeezing agents’ margins.
Beyond pricing issues, the study notes that Pakistan’s aviation demand is dominated by labour migration and religious travel rather than tourism, resulting in low-yield passenger traffic that limits airline profitability.
Operational inefficiencies at airports—including outdated baggage systems, limited check-in counters and ground-handling bottlenecks—were also cited as factors affecting service quality and operational efficiency.
Stakeholders recommended reducing aviation-related taxes, improving access to financing, upgrading airport infrastructure and developing a unified national aviation strategy integrating airlines, airports and tourism to strengthen the sector’s competitiveness.
Copyright Business Recorder, 2026